The southern dimension of Sino–European relations – Mediterranean states in the crossfire of superpower interests

The southern dimension of Sino–European relations – Mediterranean states in the crossfire of superpower interests

 

26 March 2021

Eszter Boros – Nóra Anna Sándor

The relationship between Beijing and Washington is extensively discussed on a daily basis, and indeed we also often read about the relationship between China and the European Union. At the same time, less attention seems to be paid to the southern part of the EU, although the Mediterranean Member States, particularly the large economies of Italy and Spain, also play an important role in shaping EU–China relations. Typically, these countries strive to take the most optimal steps amid the economic difficulties and varying bloc interests, and their aspirations to strengthen the Eurasian partnership can also lead to interesting developments in terms of the geopolitical situation of the EU as a whole.

In this article, we take stock of recent developments in four southern Member States. The topic is all the more important as the Comprehensive Agreement on Investment (CAI), an investment agreement concluded between the EU and China at the end of December 2020, could open up the Chinese internal market to EU companies to an unprecedented extent. However, the agreement and its timing provoked different reactions in the EU, including within the countries of Southern Europe. While Spain, Italy, Belgium and Poland criticised the German Chancellor for pressing for the agreement, Portugal pointed out that it would be unwise to block the agreement on the grounds of concerns voiced by the United States. This debate clearly reflects the geopolitical realities of the 21st century, in which the states of Southern Europe – along with others – are skating on thin ice as far as their interests relating to China and the Atlantic alliance are concerned.

Italy: navigating between alliances and economic interests

In recent years, Italy has travelled on a remarkable course between moving closer to China, strengthening Eurasian cooperation and efforts to maintain the Atlantic alliance. Its series of foreign policy manoeuvres are mainly explained by changes in domestic policy. The government recently formed under the leadership of Mario Draghi, former President of the European Central Bank, is the third one in Rome since 2018. Orientation towards Beijing was started by the first of the two previous administrations, which also included the “anti-establishment” Five Star Movement. In 2019, Rome joined China’s strategic project, the Belt and Road Initiative (BRI, also referred to as “New Silk Road” and “One Belt One Road”). Met with a great deal of controversy in the West, the move was motivated by hopes for economic benefits. Given the country’s very poor growth record in the 2010s, the Italian administration deemed the inflow of Chinese capital to represent a unique opportunity to revive the economy. Projects worth a total of USD 2.8 billion were agreed under the umbrella of the Belt and Road, equivalent to 14% of Chinese investments in Italy over the preceding 20 years (USD 20 billion).

Cooperation between the two countries was also strengthened during the period of the first COVID wave, when rapid assistance from Beijing (deliveries of protective equipment, partly donations) was met with sympathy on the part of the Italian public. By this time, however, the winds had somewhat changed in Rome, with the new coalition partner of the Five Star Movement, the Democratic Party (PD), taking the traditional Atlanticist line. After Italy’s accession to the Belt and Road Initiative, US diplomacy also set itself in motion, and as a result of its successful efforts, Chinese companies were essentially forced out of 5G developments in Italy.

In February of this year, Mario Draghi formed a multi-party government of technocrats that will focus primarily on using the resources of the European Recovery Fund. Accordingly, the new cabinet is therefore also likely to seek to balance its affairs between the Western alliance and Chinese economic relations. Rapprochement between Rome and Beijing over the medium term will depend on how the magnitudes of the economic stimulus from the EU and China compare to each other.

Greece: more tangible benefits of cooperation with China

Along with Italy, Greece suffered immensely in the 2010s. The government, elected in 2015 and led by the radical left-wing Syriza, counted on Chinese capital a great deal for the management of the economic crisis and the renewal of infrastructure. In 2018, the country joined the Belt and Road Initiative, followed by its entry into the 17+1 China–Eastern Europe cooperation in 2019. Athens plays a key role in the New Silk Road through the port of Piraeus, and development of this maritime hub is generally regarded as an example of successful cooperation. (In contrast to the port of Trieste, where no effective investment has occurred so far, due to disagreements between the Chinese and the Italian parties.)

Cooperation with China continued even after the victory of the centre-right New Democracy in the 2019 elections. It is worth noting, however, that in managing tensions with its rival Turkey, Athens can only rely on the Atlantic bloc, and its friendly relations with the West create barriers to rapprochement with China. As a clear example of that, US diplomatic lobbying against Huawei met no resistance in Athens.

Accordingly, Greece also has to strike a balance between its Western and Chinese relations. That said, Athens seems to be in a somewhat easier situation compared to Rome. On the one hand, due to its small size and peripheral location, the country has more room for manoeuvre, while the benefits it derives from its economic cooperation with China also appear to be more tangible. Consequently, over the longer term as well, Beijing can count Greece among its more stable partners in the EU.

Spain: prudent rapprochement with the giant of the Far East

Over the past 10 years, the main objective of Spanish foreign policy with regard to China has been to strengthen economic relations. Dubbed by the Chinese as “our best friend in Europe”, the Southern European country was also able to count on China’s economic assistance during the 2008–2009 economic and financial crisis, when about 12% of Spanish sovereign debt was purchased by the Asian state. Looking at the current trends, however, Spain being China’s best friend in the EU appears to be a thing of the past. That said, China remains a major investment partner for the Southern European country, despite the fact that, according to data for December 2020, Chinese FDI amounts to approximately EUR 18.8 billion, which is only a quarter of the US FDI stock of EUR 87.6 billion.

Spain has taken a cautiously optimistic approach to China’s New Silk Road project, which it has not yet formally joined. Nevertheless, full agreement on Chinese megaprojects is also lacking at the level of internal policy: although the government has refused to participate in the Belt and Road programme, the Spanish Communist Party (PCE) is urging closer cooperation with China within the framework of the programme. The development of the 5G network has proven to be a key issue, in relation to which Spain has already been warned by the US, one of its principal allies outside the EU. Cautioning its Southern European ally, the USA stated that using the services of Chinese Huawei and ZTE could compromise the sharing of intelligence and security data between the parties. It is therefore clear from the Spanish administration’s foreign policy manoeuvring that it sees China as both a challenge and an opportunity and prefers not to commit to either side. Instead, it pursues a prudent foreign policy with the Asian giant, remaining mindful of the EU’s interests.

Portugal: caught between three fires

As for Spain, partnership with China is of paramount importance for Portugal. However, prompted by Portugal’s increasingly close relationship with China, concerns have been raised from time to time by the European Union, which the government has sought to dampen by asserting that Sino–Portuguese relations are developing strictly within the political and economic framework of the European Union, and that by no means is Portugal strengthening its partnership with China at the expense of its relations with the EU. Unlike Spain, Portugal signed a Memorandum of Understanding with China on the New Silk Road in November 2018.

From a geostrategic point of view, one of the most interesting aspects of the Portugal–US–China triangle concerns the port of Sines, the largest in Portugal. In 2019, the Portuguese administration launched a tender for the construction of a new terminal, which provided for significant capacity development, and which the Portuguese Government would implement under the auspices of the New Silk Road. At the same time, given the tremendous business opportunities offered by the project, the events related to the development of the port are also being watched closely by the USA. Compared to Spain, Portugal is engaged in a more lively discussion with the USA on the development of the 5G network. In recent months, those discussions have deteriorated to the point of the USA calling for Portugal to choose between its allies and China.

Overall, therefore, the four Mediterranean countries are opening up to Eurasian cooperation and China, and consider economic cooperation with Beijing desirable, but have varying degrees of room for manoeuvre. The two larger states, Italy and Spain, are important members of the Western alliance by virtue of their size, which is why their rapprochement with China will in any case “raise the alarm” earlier in Washington and Brussels. Meanwhile, the two smaller players, Greece and Portugal, have been able to make progress in deepening their Chinese relations.